Our current tax code is progressive and complex. The AMT is "flat" (really 3 rates, 0, 26 and 28%), but complex because you have to calculate your regular tax too and because some income is subject to the AMT while others isn't.
Although Steve Forbes pushes the flat tax, his real advantage is simplification, not flatness. You could have a very simple progressive tax - how much did you make and look that up on a chart to find your tax.
The SS tax is near the ideal for simplification because the average tax payer never does anything with it. Only people owning small businesses or people who go over the maximum taxable amount between multiple jobs have to fill out anything for it.
So far I haven't had to deal with the AMT. TurboTax just says that I don't have to pay any additional because of it. I don't know if that is because I am below the exemption limit, or if my AMT is less than I have to pay anyway.
Although Steve Forbes pushes the flat tax, his real advantage is simplification, not flatness.
There is nothing particularly simple about the Forbes or any other flat income tax proposal for that matter.
The complexity of any income tax system, regardless the number of tax brackets it contains, is inherent to the definition of income and separating gain (i.e. income) which is taxable from return of one's capital inputs which are not income to be taxed.
Tax Foundation: http://www.taxfoundation.org/blog/show/1629.html
The Congressional Research Service has released an interesting new report, "Flat Tax Proposals and Fundamental Tax Reform: An Overview". Here's the summary:
President George W. Bush has stated that tax reform is one of his top priorities.
He appointed a nine-member bipartisan panel to study the federal tax code, and
November 1, 2005, this panel proposed two alternatives to reform the code including simplification elements. Consequently, the concept of replacing our current income tax system with a “flat-rate tax” has received renewed congressional interest.Although referred to as “flat-rate taxes,” many of the recent proposals go much
further than merely adopting a flat-rate tax structure. Some involve significant
income tax base broadening whereas others entail changing the tax base from income to consumption.Proponents of these tax revisions often maintain that they would simplify the tax
system, make the government less intrusive, and create an environment more
conducive to saving. Critics express concern about the distributional consequences and transitional costs of a dramatic change in the tax system.Most observers believe that the problems and complexities of our current tax system are not primarily related to the number of tax rates but rather stem from difficulties associated with measuring the tax base.
Read the full report here (PDF).
The above PDF report from the Congression Research Service, compares and contrasts the numerous tax reform proposals before the current session of Congress. It is a very informative report, that anyone interested in understanding what is actually being proposed in legislation before Congress today should read. The CRS report has a broad discussion of the various "Flat Tax" and "consumption tax" proposals that have been introduced as bills to be considered for enactment.
The dominant portion of the current tax code is mainly involved with separating income which is taxable from return of one's capital with is not and therein lay the inescapable complexity that is inherent to any income tax system.
I highly recommend everyone to read the Vern Hoven paper on this particular topic and how the Forbes version of a flat income tax would impact the tax preparation industry and there by all businesses that must deal with income taxes what ever there nature.
See:
Flat Tax as Seen by a Tax Preparer
by Vern Hoven
A Special Report by Tax Analysts Tax Notes, Volume 68, No. 6, pp 747-754.